Posted on 02 Sep 2020
Fitch Ratings has increased all iron ore price assumptions due to continued tight market supply. Vale would need to markedly ramp up its production in 2020-2022 for the market to be balanced or oversupplied, the credit ratings agency says.
“No other miner has a comparable impact on the market balance and all of them have been pushing hard to deliver incremental volumes and benefit from the price environment,” Fitch says in a note seen by Kallanish. “Still, they have not been able to replace the 80 million tonnes that Vale lost following the 2019 dam disaster.”
Fitch now sees 62% Fe iron ore fines cfr China at $95/tonne in 2020, $75/t in 2021 and $70/t in 2022 versus $75/t, $60/t and $60/t respectively previously.
Coking coal price assumptions, however, have been reduced for 2020-2022 on account of lower-than-expected market prices year to date, and a slower-than-expected recovery in global steel production.
“Demand outside of China remains under pressure, while internal coking coal supply improved considerably in China and purchases of seaborn coal are restricted,” Fitch observes. “Furthermore, the ban on Mongolian coking coal exports has been lifted, which increased supply from the country. Reduced output by major coal producers were not sufficient to offset lower demand.”
Fitch now sees hard coking coal fob Australia at $120/t in 2020, $130/t in 2021 and $135/t in 2022 versus $140/t for each previously.
Finally, the firm has raised nickel price assumptions for 2020 due to stronger-than-expected year-to-date price performance. The unchanged medium- and long-term prices reflect a potential tightness in supply as Indonesian ore exports remain banned by the government and may not be fully replaced by other nickel suppliers. Fitch expects strong long-term demand, particularly from batteries for electric vehicles.
LME spot nickel prices are now seen at $13,000/t in 2020 versus $11,500/t previously. In 2021 and 2022 they are still seen at $13,250/t and $14,000/t respectively.
Source:Kallanish
